The Unpaid Seller

Who is an Unpaid Seller?

Seller

who has not been paid

(either in the whole or partial)

One

who has received payment

in the form of bill of exchange
or other negotiable instrument
which has been dishonored

Rights of an Unpaid Seller

When

property of goods passed to

buyer
Right of Lien
Right of Stoppage in Transit
Right of Resale
When

property of goods not passed

to buyer

Right of Withholding Delivery

Other Rights

Overview of rights of Unpaid

Seller

Unpaid seller's lien (S.41-43)

The seller'slienis aright to
retain
the
goodsuntil
thewholeof the price has been
paid or tendered.

EX.

A is a seller who sell goods

to the buyer B for Rs. 1000 but
b says to make payment after
30 days but later on seller finds
that buyer b is not able to make
payment due to insolvency, so
he can take the goods back
from the buyer.

Unpaid
No

Credit Sale
Possession

Termination of Lien(Sec.
49)
Delivery

to a carrier.
Possession by the buyer.
Seller waives his right of lien.

Case on Right of Lien

A Case in which X sells his car in an
auction to Y who is the highest bidder. Y
pays by cheque and is allowed to do so
provided he signs a document stating
that the property in the car would not
pass to him until the amount is credited
to Xs a/c.
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Unpaid seller's right of

stoppage of goods in transit
S.44states, 'when the
buyer of goods becomes
insolvent the unpaid
seller who has parted
with the possession of
the goods has the right
of stopping them in
transit, that is to say, he
may resume possession
of the goods as long as
they are in course of
transit, and may retain
them until payment or
tender of the price.'
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X sold goods to Y for RS.200000 .Y said

that he will make payment at the time of
delivery ,then X sends the goods through truck ,
but on the way seller receives a call from buyer
where he get to know that Y is not able to
make payment. X retains the possession of the
goods by stopping the goods in transit.
Here ownership is changed but the
possession of goods is with seller until buyer
makes the payment

EX.

 When the buyer

becomes insolvent.
When the goods are in
transit(Sec. 50)

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Duration
Goods are in transit when they have
passed out of the possession of the
seller into the possession of a carrier,
but have not yet reached the possession
of the buyer.

13

Transit Comes to an end when

The

buyer/agent obtains

delivery before the

appointed destination.
When

the carrier

acknowledges after the

arrival at the appointed
destination.
Carrier

wrongfully

refuses delivery.

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Unpaid seller's right of resale

Unpaid seller can resale his goods

after executing his Right of Lien on
retaining his goods or after
exercising his Right to Stoppage in
Transit upon insolvency of the buyer
under some circumstances.
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RIGHT OF RE-SALE:If

a buyer is not able to pay the money

then seller can sell the goods to other
person without asking buyer(if goods
are perishable , and if non-perishable
only by giving prior notice) .
If seller makes profit by reselling
them , then he is not liable to pay
surplus if any to the buyer
If occurring loss then seller must claim
first by giving prior notice to buyer for
the loss occurred.

Circumstances for Resale:

Where goods are perishable

Where seller gives notice to

buyer of his intention to resell
and buyer does not pay the price
within a reasonable time after the
notice

Where seller has expressly

reserved his right of resale in

If the seller has given notice to

the buyer:
He can hold the buyer responsible for

loss suffered due to breach of contract.

Profits earned on resale are retained by

the unpaid seller.

If notice has not been given to

the buyer:
Seller cannot recover damages
from buyer.
Seller has to pay the profits if
any to the buyer.
Seller can claim difference
between the contract price and
the market price at the date of
the breach.

Ex.

A seller sell bike to y .Y says

he will make payment after 30
days but y is unable to make
payment on due date.
Here seller can re-sell bike to
another person by giving him
prior notice.

RIGHT OF WITH-HOLDING
DELIVERY
Where the property in goods
has not passed to the buyer, an
unpaid seller has, in addition to
his other remedies. A right of
with-holding delivery similar to
and

in

co-existence

with

his

rights of lien and stoppage in

transit where the property has
passed to the buyer.
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Ex.

K sold goods to m for Rs

50000 for which he receives
cheque and paid it into bank
.But during delivery period he
finds that cheque is bounced
from bank so the seller k
withhold the delivery of goods
until the payment is made.

Sec. 55 & 56 Other

Rights

Sue the buyer for price of goods

Seller may sue buyer for damages

for wrongfully neglecting/refusing
to accept the goods

Recover interest from buyer where

there is a specific agreement to
that effect. If there is no
agreement, seller may charge
interest on price when
it
becomes due.

Effect of Sub-Sale or Pledge by

buyer-Section 53
In

case of transfer of goods by

buyer, the unpaid sellers right of
lien or stoppage in transit can be
exercised subject to rights of
transferee. When pledgee sells
goods, the unpaid seller is
entitled to receive the surplus
sale proceeds.

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